Crypto lending platform Celsius Network has been in the news several times over the past few weeks. The company has made repeated headlines given that it took a big step towards centralization and ultimately paused all customer withdrawals as a means of coping with ongoing market volatility.
Celsius Is Filing Bankruptcy
Sadly, things didn’t quite stop here. Word has since been received that Celsius is now entering bankruptcy proceedings, hinting that maybe this crypto winter was too powerful for it to handle. Right now, the company is being investigated by several financial regulators in Washington, Texas, and New Jersey, and it doesn’t look like there’s a light at the end of the tunnel for Celsius or its staff.
Members of the special committee of the board of directors for Celsius announced the following:
Today’s filing follows the difficult but necessary decision by Celsius last month to pause withdrawals, swaps, and transfers on its platform to stabilize its business and protect its customers. Without a pause, the acceleration of withdrawals would have allowed certain customers – those who were first to act – to be paid in full while leaving others behind to wait for Celsius to harvest value from illiquid or longer-term asset deployment activities before they receive a recovery.
At the time of writing, the company has roughly $167 million in cash on hand to ensure liquidity and boost certain operations as the firm tries to restructure itself. In filing Chapter 11 bankruptcy, Celsius is not necessarily shutting its doors completely, and customers are not necessarily in danger of losing all their money.
Celsius is simply protecting itself during this time to ensure it can take steps to restructure its protocols and prevent customers from suing them or taking drastic measures to remove their funds from the lending platform. Until the hearings end, customers will still be unable to make withdrawals.
Celsius is not the first bankruptcy victim to emerge from the harsh crypto bear market. Three Arrows Capital – a digital currency hedge fund – took similar action a few weeks ago. A court document stated the following:
By filing the petition to commence this Chapter 15 case (the ‘Chapter 15 Case’), the foreign representatives seek to stay active efforts by individual creditors to seize assets and to preserve the status quo and afford the foreign representatives an opportunity stabilizes the debtor’s estate, preserve the debtor’s assets, and conduct a complete investigation of the debtor, claims against its estate, and its assets, including causes of action.
So Many Companies Have Fallen
This move succeeded other bankruptcy proceedings initiated by Voyager Digital, a crypto lender. Stephen Ehrlich – the chief executive of the company – explained:
The prolonged volatility and contagion in the crypto markets over the past few months… require us to take deliberate and decisive action now.